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Netherlands: Non-food discounter Action presents €519m EBIT

Updated: Mar 31, 2021

Discount non-food Retail Chain Action (owned by PE 3i Group) has significantly increased its profitability in the past 12 months. The company posted gross profit of € 608m (US$814m) in the 12 months to the end of October. A year earlier, Action still recorded a gross profit of € 519m (US$695m) her restrictive measures around corona.

Action, the Netherlands-based cut-price discount merchant, is the 3i's largest private equity holding. At the half-year results it said its 50% in Action was now worth about €4.3bn (US$5.8bn), up from €3.5bn (US$4.7bn) in March, based on a valuation of about 18 times earnings. Decreases in footfall in the past six months have been more than offset by increased basket sizes of sub-€5 items. The pandemic had done little to dent 3i’s conviction that Action could quadruple its store estate in time, said Simon Borrows, former banker turned 3i chief executive and Action’s chair, who at times sounds more like the boss of a European discount retailer than a buyout group.

His confidence was underpinned by first-half numbers from B&M, a rival. UK discounter B&M posted a 25% increase in revenues, a 95% rise in adjusted ebitda and announced a 25p (US$0,33) special dividend to investors. 3i is sticking to paying ordinary dividends of 17.5p (US$0,23) a share, worth £169m (US$226m) in total. Private equity detractors will carp about the £588m (US$787m) in carried interest paid out to partners in the past six months after a fund crystallised its Action stake. They will applaud any move by the Treasury to raise cash by taxing carried interest more punitively. Mr Borrows counters that a change to the UK tax regime would probably affect about five of its people. More to the point, perhaps, during Mr Borrows’ eight years at the top, 3i’s shares have risen from a discount to a hefty premium to assets and the company has paid out considerably more in dividends than it has in carried interest. And in contrast to the stereotype buyout businesses that load up investee companies with debt to flog within five years, 3i bought Action in 2011 for about €130m (US$155m). It is worth more than €11bn (US$13.1bn) today and Mr Borrows has no plans to sell. That’s not a bad template for a 21st-century version of the Industrial and Commercial Finance Corporation.

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